View the related Tax Guidance about Rollover relief
Rollover relief
Rollover reliefRollover relief, or ‘replacement of business assets’ relief, allows traders to defer the payment of capital gains tax when they sell a business asset and replaces it with another in prescribed circumstances. Sometimes rollover relief is written as ‘roll-over relief’. Rollover relief works by deferring the amount of the gain and reducing the base cost of the new asset by an amount equal to the rolled over gain. Full rollover relief is not always available (see below).For groups of companies, rollover relief applies on a group wide basis (broadly, a gain made by one company can be rolled into the purchase of a qualifying asset by another group company). For more on the rules that apply to groups, see the Group gains guidance note. Conditions for the reliefQualifying personsRollover relief can only be claimed by ‘persons’ carrying on a trade (referred to in this note as a ‘trader’). This includes sole traders, partners in a partnership, companies or trustees / personal representatives carrying on a trade. More information on rollover relief for trustees can be found in the Other capital gains business asset reliefs guidance note. Qualifying reinvestmentThe old asset, ie the asset being sold, must be used for the purposes of a trade carried on by the trader. In other words, the asset must not be acquired simply for investment purposes. Rollover relief is also available where an individual owns an asset, but the asset is used by their personal company (see further below).The new asset, ie
Calculation of corporate capital gains
Calculation of corporate capital gainsThis guidance note sets out the details of the calculation of a corporate chargeable gain, allowable capital losses and the restrictions on their use. It also covers disposals involving foreign currency, the interaction with capital allowances and wasting assets. A number of helpful practical points are also set out at the end of the note. For a general overview of corporate capital gains, including the scope of the charge, see the Corporate capital gains ― overview guidance note.Calculation of gainsA separate computation will be required for each asset that is disposed of during a company’s accounting period.For a proforma for calculating gains and losses, see Proforma ― corporate capital gains computation.To calculate the gain, it will be necessary to determine the following:•date of disposal•disposal proceeds•acquisition costs•allowable expenditure•if the asset was acquired before 1 January 2018, indexation allowance up to 31 December 2017Each of these elements is explained in detail below.The other guidance notes in this section provide further details with regard to specific issues as they apply to companies.Disposal dateGenerally, the date of disposal will be the date of the contract or, if it is a conditional contract, the date that the condition is satisfied. It should be noted that the rule under TCGA 1992, s 28 (which fixes the date of disposal for an unconditional contract as the date of the contract) only applies if the contract is completed (ie if the disposal actually takes place) and so it
Corporate capital gains ― toolkit
Corporate capital gains ― toolkitThis ‘Tolley Toolkit’ note pulls together various functional content resources that are relevant when advising on corporate capital gains:Toolkit resourceDocument linkCorporate capital gains checklistChecklist ― corporate capital gains computationProforma ― corporate capital gains computationLetter ― group rollover relief claimLetter ― rollover relief claimLetter ― section 171A (TCGA 1992) electionDetailed further guidance on corporate capital gains can be found in the Corporate capital gains ― overview and Calculation of corporate capital gains guidance notes.
Transfer of business premises
Transfer of business premisesThis guidance note provides an overview of the key factors to take into account on the transfer of premises used for business purposes as part of a trade and asset sale. A wide range of potential tax implications need to be considered and the final treatment will depend upon a number of influencing factors such as the value of the property, the nature or use of the property, the capital allowances history and the availability of any reliefs for example. Links to more detailed commentary on these issues are provided below.For guidance on the tax implications of selling a business whilst retaining the business premises, see the Tax implications of trade and asset sale guidance note.Capital allowances ― fixturesBuildings usually contain items which are attached or placed permanently in the building, which are referred to as fixtures in the tax legislation. When the building is sold, such assets are also sold given that they cannot easily be removed. Examples of fixtures include:•lifts and escalators•heating, lighting and electrical systems•alarm systems•sanitary appliances, and hot and cold water systems•telephone and data installationsWhere fixtures change hands, an adjustment is needed to split the allowances between buyer and seller. The availability of capital allowances on these assets for the purchaser of the building will depend on whether the seller could have claimed capital allowances, the original cost of the fixtures and what disposal value has been brought into account on any previous disposal. In most cases,
Deferral of capital gains via reinvestment
Deferral of capital gains via reinvestmentWhy defer a gain?An individual’s net taxable income and chargeable gains for the tax year influence the rate of tax payable on their capital gains. See the Introduction to capital gains tax guidance note.Depending on the nature of the asset that is subject to disposal, this can result in the individual paying capital gains tax (CGT) at 20% or 28% (reduced to 24% from 6 April 2024 onwards) in tax years where their taxable income and gains exceed the basic rate band, but only 10% or 18% on gains in years where their net income and gains are lower than that band. If a gain is covered by the annual exemption, no CGT is due. See the Introduction to capital gains tax guidance note.The basic rate band is £37,700 for the 2023/24 and 2024/25 tax years, but this may be extended by personal pension contributions or donations to charity via gift aid. See the Proforma income tax calculation guidance note.The annual exemption is £6,000 for 2023/24 and £3,000 for 2024/25. To optimise their CGT position, a taxpayer can reinvest the proceeds from the sale of an asset into the purchase of a qualifying asset and elect for the gain to be rolled into those replacement assets.When the replacement asset is subject to disposal, or possibly where the investment conditions are broken, the deferred gain falls back into charge to CGT. This may be some years after the original gain arose and in many cases,
Foreign land and property income
Foreign land and property incomeThis guidance note covers, in outline, the UK tax consequences of deriving income from land or property overseas.It looks at the interaction with overseas taxes, and considers the UK tax treatment of let property, overseas farms, woodlands, and the use of companies to hold foreign holiday property. Furnished holiday lets situated abroad are covered in the Furnished holiday lets guidance note although it should be noted that the furnished holiday let tax regime will be abolished from April 2025. This guidance note does not cover capital gains, VAT or inheritance tax, except incidentally.For more on capital gains tax, see the Disposal of land ― individuals and Assignment and grant of leases for capital gains tax guidance notes.Property held in trust is outside the scope of this guidance note. For information on this, see Simon’s Taxes I5.12. This guidance note also does not extend to remittance users, see the Remittance basis ― overview guidance note for more detail.Hotels and guesthouses are treated as foreign businesses, see the Setting up overseas ― sole traders and partners and Introduction to setting up overseas ― companies guidance notes for some of the issues to consider when setting up a foreign business.Interaction with overseas taxesIncome from farms, woodland or let property outside the UK is almost invariably subject to tax in the overseas country. Comprehensive advice on the foreign tax implications is essential, and this is best obtained before the individual begins the overseas venture.In particular, the individual should be
Corporate intangibles tax regime ― overview
Corporate intangibles tax regime ― overviewThe corporate intangibles tax regime, found in CTA 2009, ss 711–906 (Part 8), generally governs the taxation of intangible fixed assets acquired or created by companies on or after 1 April 2002. The definition of an intangible fixed asset is discussed in detail in the What is an intangible fixed asset? guidance note. The corporate tax treatment essentially follows the treatment of intangibles in the accounts. There are however restrictions on the deductibility of debits in relation to goodwill and other customer-related intangible assets depending on the date of acquisition or creation, see the Goodwill and other customer-related intangible assets guidance note.Prior to Finance Act 2002, there was no harmonised regime dealing with the taxation of corporate intangibles ― this continues to be the case for most ‘old’ corporate intangibles.The corporate intangibles regime has gone through a number of iterations since its introduction in April 2002, most recently in July 2020, particularly in relation to goodwill and other customer-related intangible assets.The regime is complex and requires detailed recording keeping by companies and their advisers, particularly in relation to acquisition dates, relationships between companies and the market value of the asset at the time of the first acquisition under the new rules. It is therefore very important for advisers to confirm the history of an intangible fixed asset when it is being acquired from a related party.For a discussion of the changes introduced from 1 July 2020, see ‘Intangibles and fungibles’ by Pete Miller in Taxation,
Agricultural buildings
Agricultural buildingsThis guidance note summarises the treatment of agricultural buildings in farms including what capital allowances can be claimed, the assessment of farm buildings which are let out, repairs and renewals and the possible effect of having redundant farm buildings on tax reliefs.More details of the IHT position of specific buildings can be found in the following guidance notes:•Agricultural tenancies•APR and the farmhouse•APR and farmworkers' cottages•Agricultural value and development valueDefinition of plant not buildingA large amount of expenditure in relation to a modern building relates to items of plant and machinery. The farmer or landowner may identify such expenditure and claim the appropriate capital allowances and annual investment allowance (AIA) in accordance with the rates available. These are generous with the AIA limit at £1,000,000. All appropriate conditions must be met. See the Annual investment allowance (AIA) guidance note for more information.The ability to claim AIA on plant applies as much to a second-hand building as a new one. It can be quite normal practice for farmers to buy second-hand barns. The apportionment between the categories depends on the valuation techniques and requires knowledge of building construction.The ‘after-tax’ cost of funding a new diversified venture will be affected by whether expenditure is treated as buildings or plant. There may well be borderline cases where planned expenditure could be regarded as plant. However, there are certain items of expenditure where the legislation is clear as to what it deems to be plant alterations to buildings incidental
Disposal of land ― individuals
Disposal of land ― individualsIf an individual disposes of land (which includes buildings and any estate or interest in land or buildings), on first principles it will be taxable as either:•trading income (if it is a trade or a venture in the nature of trade), or•a capital gain (but see anti-avoidance below)For a discussion of when the disposal of land or buildings could be considered to be trading income, see the Application of the badges of trade guidance note. The rules on treating the sale as trading income have priority over the capital gains tax treatment discussed in this guidance note.However, what if the disposal of land is not considered to be a trade or a venture in the nature of trade but it is still a disposal with the intention of making a profit similar to that of a property dealer? This is where the transactions in UK land anti-avoidance provisions bite to treat the gain as trading income. The conditions and the types of situation caught by this anti-avoidance provision are discussed in detail in the Transactions in UK land ― individuals guidance note.The commentary below explains the various types of part disposal associated with land. Guidance notes on topics associated with the disposal of land but not specifically covered within this note are listed below in ‘Other points to consider’. Also, bear in mind that if the individual is not resident in the UK and the disposal is of UK land, the computation rules
Corporation tax return ― compliance toolkit
Corporation tax return ― compliance toolkitApproach when preparing a corporation tax returnTax law has become increasingly complex in recent years and there is often a myriad of issues to keep in mind when preparing the corporation tax return. Coupled with this, the tax compliance process is typically highly pressured because of the somewhat competing priorities of having to finalise the tax return quickly but at the same time accurately and to a high standard. This toolkit is aimed at supporting tax advisers that prepare or review corporation tax returns in delivering high-quality and accurate returns by providing guidance on the most common areas in a set of financial statements that give rise to tax adjustments. The toolkit focuses on the issues typically encountered by a UK trading company, but many of the issues will also be relevant to non-trading companies such as property investment companies or holding companies. The accounting areas discussed below follow the typical order of a standard set of financial statements. The list is not exhaustive, but covers the more frequently encountered tax issues in reviewing a set of financial statements and preparing the tax return. An explanation of the relevant issue for each area is provided, together with practical points to be aware of and links to additional information so that more detailed research can be carried out. Initial considerations when starting the corporation tax compliance reviewThere are several sources of information which can prove extremely useful when starting the compliance review process. These can
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